Auto Insurance

AAA

DEFINITION of 'Auto Insurance'

A policy purchased by vehicle owners to mitigate costs associated with getting into an auto accident. Instead of paying out of pocket for auto accidents, people pay annual premiums to an auto insurance company; the company then pays all or most of the costs associated with an auto accident or other vehicle damage.

INVESTOPEDIA EXPLAINS 'Auto Insurance'

Auto insurance premiums, or the amount policyholders pay to be insured, vary depending on: age, gender, years of driving experience, accident and moving violation history, and other factors. Most states mandate that all vehicle owners purchase a minimum amount of auto insurance, but many people purchase additional insurance to further protect themselves.
A poor driving record or the desire for more complete coverage will lead to higher premiums. However, you can reduce your premiums by agreeing to take on more risk, which means increasing your deductible.

RELATED TERMS
  1. Underinsured Motorist Coverage

    An auto insurance policy provision that extends coverage to include ...
  2. Giuseppe Morchio

    An Italian executive who became CEO of Italian automaker Fiat ...
  3. Comparative Negligence

    A principle of tort law that applies to casualty insurance in ...
  4. Insurance Claim

    A formal request to an insurance company asking for a payment ...
  5. Insurance

    A contract (policy) in which an individual or entity receives ...
  6. Deductible

    1. The amount you have to pay out-of-pocket for expenses before ...
RELATED FAQS
  1. How much money can Uber drivers make?

    According to the company’s own data released in May 2014, more than half of the Uber drivers operating in New York City earn ... Read Full Answer >>
  2. How important are seasonal trends in the automotive sector?

    The automotive industry has some definite seasonal trends, with peak demand occurring in the spring and fall, and lowest ... Read Full Answer >>
  3. How is the basket of goods selected for the Consumer Price Index?

    In the United States, the inflation level in the economy is approximated by the Bureau of Labor Statistics via a basket of ... Read Full Answer >>
  4. What is the automotive sector?

    In the world of finance, the automotive sector represents the financial performance and economic variables related to automobile ... Read Full Answer >>
  5. What other sectors are most highly correlated with the automotive sector?

    The automotive sector is a broad category correlated with a variety of related industries. Auto parts manufacturers and raw ... Read Full Answer >>
  6. How do you calculate the income effect distinctly from the price effect?

    Economists calculate the income effect separately from the price effect by keeping real income constant in the calculation. ... Read Full Answer >>
Related Articles
  1. Home & Auto

    The History Of Insurance

    The first written policy appeared in Hammurabi's Code. Find out how it evolved from there.
  2. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  3. Budgeting

    Free Car Payment Insurance: What's The Catch?

    Many dealers are offering payment protection plans on new cars. Are they right for you?
  4. Home & Auto

    Wheels Of A Future Fortune

    Buy a quality car without driving your expenses through the roof.
  5. Options & Futures

    Top Tips For Cheaper, Better Car Insurance

    Accident, theft, vandalism - make sure your coverage will protect you when you need it most.
  6. Personal Finance

    How To Get The Best Price On A New Car

    Find out tips that'll save the haggling and get you the best price on a new car.
  7. Insurance

    The True Cost Of Owning A Car

    Driving is often the most convenient way to get around, but it'll cost you.
  8. Savings

    How to Invest in Liquor (and Avoiding the Hiccups)

    Investing in liquor has been profitable for ages but there could be some hiccups along the way.
  9. Economics

    What are Consumer Goods?

    Products that are purchased for consumption by the average consumer. Clothing, food, automobiles and jewelry are all examples of consumer goods
  10. Economics

    What are Consumer Packaged Goods?

    Consumer packaged goods, CPGs, are items that consumers use and purchase often.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center